Growth of tax revenue: an inter-state analysis

Abstract

My study is an inter-state comparison of the growth of tax revenue of 15 major states covering a period of 21 years from 1985-86 to 2005-06. We have calculated the simple percentage, all state average, co-efficient of variation, income elasticity, rank correlation co-efficient, regression co efficient, tax – income ratio, taxable capacity and tax effort. The thesis contains 9 chapters. The major conclusions are that the revenue from all taxes increased in all the states both at current prices and constant prices. The developed states have improved their tax effort. In all the states, Sales tax offers the largest amount of revenue followed by State excise duty and Stamp duty and Registration fees. The tax policy has been designed on the basis of the objectives of Five Year Plans. The State Governments are successful in achieving the objectives of revenue raising for their economic development. The tax structure of the states has not undergone changes due to economic development of the states. The state taxes are responsive to changes in state income and to the economic progress of the states. The state tax system is regressive as larger share of the revenue comes from commodity taxes which are indirect taxes. Though there is a threat of erosion of states’ fiscal autonomy as their dependency on central transfers is increasing there is no evidence for substitution effect or fiscal irresponsibility on the part of the states.